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NATIONAL TREATMENT AT THE WTO: THE ROLES OF PRODUCT AND COUNTRY HETEROGENEITY *
Author(s) -
Saggi Kamal,
Sara Nese
Publication year - 2008
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2008.00515.x
Subject(s) - quality (philosophy) , product (mathematics) , international economics , welfare , economics , product market , world trade , market size , international trade , market access , business , market economy , ecology , philosophy , geometry , mathematics , epistemology , biology , incentive , agriculture
This paper analyzes the World Trade Organization's (WTO's) national treatment (NT) clause in a two‐country model where quality of goods and/or market size are heterogenous across countries. When market size is symmetric across countries, a reciprocal NT agreement (i) benefits the high‐quality country, (ii) hurts the low‐quality country, and (iii) delivers higher aggregate world welfare. However, such an agreement can arise in equilibrium if the high‐quality country's market is relatively bigger and the quality gap between goods is small (i.e., goods are sufficiently alike ). The qualitative nature of these results does not change when quality is endogenously determined.